EU proposes triggering crisis clause to allow virus spending

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European Commission President Ursula von der Leyen, center, European Commissioner for Europe fit for the Digital Age Margrethe Vestager, left, and European Commissioner for An Economy that Works for People Valdis Dombrovskis, right, participate in a media conference at EU headquarters in Brussels, Friday, March 13, 2020. The European Union on Friday urged member countries to put in place health screening measures at their borders to slow the spread of the novel coronavirus, but warned them to coordinate their actions to ensure that people affected can still quickly get the health care they need. For most people, the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia. (AP Photo/Thierry Monasse)

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BRUSSELS (AP) — The European Union’s executive arm on Friday proposed easing the bloc’s budget policies so member countries can spend what they need to address the coronavirus pandemic without being subject to deficit limits and other fiscal requirements.

If approved by the leaders of the 27 nations, the move would be the first time the EU activated an escape clause that allows for “a coordinated and orderly temporary deviation” from normal requirements “in a situation of generalized crisis caused by a severe economic downturn,” the European Commission said.

“Last week, I said we would do whatever is necessary to support the Europeans and the European economy. Today, I’m happy to say we delivered,” commission President Ursula von der Leyen said in a video posted on Twitter. Triggering the escape clause “means national governments can pump into the economy as much as they need.”

European countries already are putting funds into boosting health care capacity, keeping businesses afloat and helping citizens taking financial hits amid nationwide lockdowns and government-ordered closures, the EU said. Together with a dramatic falloff in economic activity, the spending “will contribute to substantially higher budgetary deficits,” the commission said..

The EU adopted the escape clause in 2011 in the wake of the global financial crisis. The European Commission said that since it forecast a week ago that the virus would lead to a 1% reduction in GDP this year, ”more adverse scenarios, linked to a deeper impact of the pandemic” had become likely.

“Indeed, assuming an extension of the health crisis up to the beginning of June or beyond, the fall in economic activity in 2020 could be comparable to the contraction of 2009,” the worst year of the global financial crisis, the European Commission said in a document outlining its rationale for the recommendation.

EU leaders are set to have a summit by video-conference on Thursday.

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